The Case for More and Better Self Direction Now...

When I first began blogging at Self Direction Central a few years years ago, the focus of my work life was Self Directed Pensions. I had the good fortune to work for two good Self Directed pension trustees and learn a great deal about the strengths and weaknesses of those plans. On the blog I was able to express my personal opinions and observations from experience especially about the need for good due diligence. I was always very distressed when I saw people make investments without thoroughly researching who was getting their money and how it is really being invested.

Now I realize that this is not that much different from investing with any mutual fund, even those with a good track record. After all, what risk does the person investing your money for the fund have attached to the results they obtain for you? There are no guarantees and the most that person risks is that they will be wrong often enough and for long enough to lose their high paying, cushy position as an asset manager. No one is likely to go after their pension if they screw up on your investments. I haven't heard of any arrests (other than Bernie Madoff) on Wall Street or in the Mortgage Community either. People have really just become used to not taking responsibility for their own results and do not require much punishment for those who take our money and run with it.

I've often wondered why we can't make them have to put their pension in the same investments they recommend for you and I, just like I wish our Senators and Congressmen/women had only the option of relying on Social Security for their retirement, instead of a separate, fully funded (with real money, not IOU's) private plan.

What has changed?

After some time off from blogging, I find there are new and very exciting variations on self directed retirement plans that can help people willing to self direct toward a better retirement. One is a new way (new since I left the business) for people to use their IRA money to fund loans for others and earn good returns without having to learn the note business and with a minimum of just $5000.00! The company is called "Lending Club" and I hope to do a webinar with the co- founder of this fascinating company, Renaud Laplanche .

The other is related to the bursting of the real estate bubble. The bust has resulted in prices for investment real estate that can be met with cash in an IRA or Cash and some leverage from Pension Real Estate Lender North American Savings Bank (NASB) which can now offer 60-70% leverage for a fixed rate and term. Properties that provide good cash flow can be purchased for amounts that make sense for the first time in 40 years.

Why Changes to the Blog Site?

As time has gone by I realized that I am interested in more than just Self Directed Pensions. I am intensely interested in  the concept and the process of how people become Self Directed in general and not just with respect to a pension plan. I am interested in how working people manage their lives and their money to create abundance and to sustain that abundance. I set up a sister site "Sustained Abundance" where I've talked about the paths I see to Abundance and to help myself and others (especially the next generation).

We are in a society where there is great pressure to conform and to be just like others in our peer group. From our earliest days in Pre-School and through our High School and College days we tend to join and conform to one group or another and we mirror the images that we think society demands of us. We do the same thing when we marry and "settle down", but for most of us, the emphasis has been on looking good instead of doing the hard things that will truly make our financial situation truly good.

Look at this excerpt from "The Soul of Capitalism" by William Greider

"From the 1950s to the early 1970s, Brown explained, virtually all classes enjoyed a robust expansion in their discretionary spending on "variety" and "status" consumption. Even the poor gained a much improved standard of living, thanks to more generous public subsidies. However, during the last three decades, as hourly wages stagnated in real terms, working families were squeezed in their ability to maintain an expanding participation in the mass consumption. They more or less succeeded, though at a steadily slowing pace. How did they accomplish this?

First, they worked harder and longer, mainly with women, wives and mothers, entering the full-time workforce and other family members taking on part-time jobs. Second, they borrowed against their savings, with credit cards and lines of bank credit that steadily drew down the accumulated equity they owned in their homes. This process explains the mountainous debt levels households built up amid the booming nineties. After storing up savings through home ownership during the sixties and seventies, the average homeowner drew down home equity dramatically during the last two decades, from 70 percent to 51 percent of mortgage value."

In the simplest terms, we got it and blew it as fast as we could on "variety and status" consumption.

Thanks to Mortgage Equity withdrawal and easy credit, in 2005 the average American was living on 125% of their annual income. Now for many the income is gone along with home equity and savings. Thanks to the loss of millions of outsourced manufacturing jobs and millions of jobs related to the latest real estate bubble, Americans (and many others too) are faced with the loss of their homes and the reality that the future may not have as much "variety and status" consumption. More importantly, people are realizing that they have not saved enough for retirement and they are trying to re-balance their lives and use the productive work time they have left to create abundance for the future.

Hard Choices Ahead

For most of us this means hard choices and  less consumption now. I cannot tell you how many times I hear from people young and old, that they do not care about the future and that they "want to live now". I wonder how many of these people are among the 15 Million (during the past 3 years) who have moved back to their parents homes or with siblings because they cannot afford to pay for the meanest rental living space.

If you are one of those who sees reason and purpose in living with less now to have a better future, send me your comments, tell me your story and how you are going about making changes. People need to realize that they are not alone, that they are not the only ones who abused the plenty they had and that there is a future that can be improved.

Here's to a future of Sustained Abundance through Self Direction, starting now.